KENYA AIRWAYS E-COMMERCE SITE SHOWS IT CAN BE DONE BUT CAN AFRICA’S BANKS KEEP UP?

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Until recently e-commerce in Africa was something that happened in North Africa and South Africa but hardly anywhere else. A major breakthrough has recently been achieved by Kenya Airways whose e-commerce site is achieving impressive business. However the continent’s rather conservative banking sector is struggling to keep up. Russell Southwood interviews Kenya Airway’s Joseph Nduva whose responsible for its e-commerce web site.

Where did the idea for the web site come from?

E-commerce is an absolute must for airlines. The travel market is moving into cyberspace and we need to move with our competitors into that environment. For airlines e-commerce actually started in the 1960s with seat bookings in travel agencies made in real time. The difference is that this airline supported network is expensive to run and we now have a free or cheaper network called the internet.

The cost differential between existing channels and online sales is 30%. A recent study by Merrill Lynch showed that for most airlines the breakdown between sales channels was as follows: travel agents (23%); online agencies (20%); call centres (13%) and own sales on the web (6%). KLM is currently selling 12% of tickets off its own site and British Airways 20%. Their targets are 40% and 50% respectively.

When did the project start?

We started in March 2001. We did an analysis of the situation. It showed that we had various handicaps based on our market being in Africa, including available ICT infrastructure. But because we have a company goal to be a world class airline, we had to acknowledge that we had a customer base outside Kenya who see buying tickets on the internet as normal. And in everything else we were world class except this.

How did you start?

We had to develop a specification for the site. One challenge was that we needed to look at two different types of markets: one where customers were not extremely ICT savvy and markets that are. Our site had to meet the requirements of both markets. So we built a site that was specific to the country the customer was logging on from.

We chose Kenyan company 3Mice as the developers of the user interface and an Indian company called Rapid IGM to do the back-end integration between the site and the reservation system.

When did you go live?

The online e-commerce site started in July 2003. You can’t book online from all countries and there are still issues about physical delivery of tickets to some countries. We’re not yet doing e-ticketing but it’s planned that it will happen. But for most countries you have a choice of having the ticket sent to you or picking it up on departure.

For those who might not know, can you explain how transactions are authorised?

No bank is able to authorise cards used over the internet. They have to use a company that will offer an e-transaction integration between the information given by customers and the bank’s own authorisation systems. Whilst there are many banks in Kenya that can issue cards, there are only two - Barclays and Kenya Commercial Bank - who can authorise transactions. They had not developed commercial systems to be e-commerce read. There was no payment gateway into their systems.

The payment gateway decides where the customer information is to be sent on the basis of the card details submitted. It verifies the status of the customer and that the sum is available in the customer’s account. It then moves money from the customer to the merchant.

A South African company iVeri provided our payment gateway. As an organisation with a registered subsidiary in South Africa we were able to go to a South African bank and open a merchant account (enabling it to accept credit card payments) there. Local banks have therefore lost a merchant account and the possibility of achieving revenue from cards all over the world.

Why have the local banks taken the attitude they have?

I don’t know why. There are merchant account operators in this country who could be doing e-commerce right now. It’s how many travellers to Kenya would like to do their reservations. It’s also blocked local tour operators putting themselves online to sell their products. It’s a problem for everyone in the tourist industry. If you can’t accept credit cards online, they think you’re a dodgy company.

What’s your online business been like?

The volume of transactions has been surprisingly significant. It’s about 2-3% of overall transactions. 60% of them of these online transactions are coming from Kenya and 40% from the rest of the world. In five years time we think that 40-50% of all transactions will be online.

It’s been very interesting for us because in some countries like Iceland, customers are buying local tickets in Kenya - for example Nairobi to Mombassa - because they obviously have confidence in the system.

What have fraud levels been like?

We’ve had none. The reason is that if you’re sensible about how you deal with cards over the internet, you don’t get fraud. There are a number of simple rules. We don’t allow you to buy for someone else. At some point in the transaction you have to actually physically produce your credit card and give a signature. This proves you’re the same person as you say you are.

Are you offering cheaper differential pricing on your online ticket sales?

We’re offering convenience and another channel to buy our products. We have two different markets and where there’s no need for differential pricing, we don’t offer it. The thing about our now closed budget brand Flamingo was that it was a direct channel operation without travel agents, hence the controversy. But we do offer additional Flying Dutchman points for members of the scheme who book online.